PSINet To Buy Transaction Network Services for $705 Million

Internet service provider PSINet Inc. announced today that it has made an agreement to buy Transaction Network Services Inc. for $45.28 a share in cash and stock, or $705 million (US$). Analysts say the move will give teeth to the Herndon, Virginia-based company’s planned foray into e-commerce.

“As financial institutions continue to outsource their critical web hosting capabilities to both TNI and PSINet, we can exploit this vertical marketplace by providing end-to-end solutions over our worldwide network,” said William L. Schrader, PSINet chairman and CEO.

PSINet will inherit technology for speeding up e-commerce transactions and a base of retailers that are ready to move their systems onto the Internet.

E-commerce Strategy

Coupled with America Online’s recent acquisition of Netscape and its recent alliance with Sun Microsystems Inc., the deal reinforces the growing trend of Internet companies offering e-commerce services to their customers.

Under the terms of the deal, each share of Transaction Network will be converted into .50 a share of PSINet plus $22.50 in cash. In order to take advantage of the e-commerce holiday buying season, both sides hope they can complete the deal before the end of the year.

Analysts feel that since PSINet’s client base is currently corporations, the acquisition could make it a strong player in the growing business to business e-commerce arena as well.

About The Companies

PSINet (Nasdaq: PSIX) was one of the first companies to offer Internet access. In 1995, PSINet — then known as Performance Systems International — bought Pipeline, one of the first providers to link consumers to the Internet. However, PSINet left the consumer business in 1996, selling off Pipeline to MindSpring Enterprises Inc.

The company offers a variety of access services, including Web site design and hosting — but e-commerce has been its recent focus. PSINet has operations in 17 countries and serves 73,000 corporate customers.

Last year, PSINet, which employs about 1,817 workers, lost $262 million on revenue of $260 million.

Reston, Virginia-based Transaction Network Services Inc. (NYSE: TNI) is an international communications company specializing in transaction data services. Its TransXpress network transmits credit-and debit card transactions to processors such as First Data and American Express. The company also offers a real-time billing validation and fraud-control service for telecommunication customers. It markets its services in Europe, Mexico, the Middle East, South America and the United States.

In 1998, Transaction Network Services, which employs about 221 workers, earned $6.9 million on revenue of $102 million.